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M/s Macro Marvel Projects Ltd. Versus Deputy Commissioner of Income Tax

2016 (2) TMI 428 - ITAT CHENNAI

Disallowance u/s.40(a)(ia) - whether disallowance made u/s.40(a)(ia) to be considered as part of business profit of the assessee of the eligible projects so as to grant deduction u/s.80-IB(10)? - Held that:- An amount outstanding at the end of the close of the assessment year is not to be allowed as business expenditure in view of provisions 40(a)(ia) of the Act. Further, we make it clear that the AO should consider only payment which is not subject to TDS for disallowance and not short deductio .....

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, if any to be considered as part of the business profit in view of the judgement of Bombay High Court in the case of CIT Vs. GEM Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT ], wherein it was held that the assessee is entitled to exemption u/s.10A with reference to addition of disallowance of PF/ESIC payments as the plain consequence of the disallowance and add back made by the A.O is an increase in the business profits of the assessee. In our opinion, this plea of the assesse .....

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05-06. Since certain issues in these appeals are common nature, these appeals are clubbed together and disposed off by this common order for the sake of convenience. 2. The assessee has raised the ground that disallowance u/s.40(a)(ia) of the Act is incorrect. Without prejudice to the above, the assessee has raised an alternative contention that the disallowance made u/s.40(a)(ia) of the Act to be considered as part of business profit of the assessee of the eligible projects so as to grant deduc .....

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perused the materials on record. In our opinion, the issue is squarely covered by the order of the Special Bench of ITAT (Vizag Bench), in the case of Merilyn Shipping and Transporters vs. Addl. CIT (136 ITD 23)(Vizag SB), wherein it was held that the provisions of the section 40(a)(ia) are applicable only to the expenses that are "payable" and outstanding at the end of the close of the financial year relevant to the assessment year and not to the amount already paid. The same view wa .....

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ot to be allowed as business expenditure in view of provisions 40(a)(ia) of the Act. Further, we make it clear that the AO should consider only payment which is not subject to TDS for disallowance and not short deduction of TDS. Since we have followed the order of the Special Bench in the case of Merilyn Shipping and Transporters vs. Addl.CIT cited supra and also the judgement of Allahabad High Court in the case of CIT Vs. M/s.Vector Shipping Services (P) Ltd cited supra, also the judgement of K .....

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case of CIT Vs. GEM Plus Jewellery India Ltd., wherein it was held that the assessee is entitled to exemption u/s.10A with reference to addition of disallowance of PF/ESIC payments as the plain consequence of the disallowance and add back made by the A.O is an increase in the business profits of the assessee. In our opinion, this plea of the assessee s counsel to be upheld in view of the judgement. We ordered accordingly. ITA No.2093/Mds./2015 5. The assessee has raised the grounds as follows:- .....

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Assessing Officer erred in computing the profit eligible for deduction u/s.80-IB(10). 4. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the eligible built up area of the project "Riverview Country" is 82,740 sq. ft. as against 57,405 sq. ft. stated by the Assessing Officer. 5. For that the Commissioner of Income Tax (Appeals) failed to appreciate that disallowance u/s.40A(3) ought to be included in calculating profits from eligible projects and hence erred .....

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